Germany continues to struggle with challenges in its manufacturing sector as it suffers from higher energy costs amid inflation and a recession, Goldman Sachs economist Peter Oppenheimer told CNBC on Tuesday.  The Bundesbank announced on Monday that the economy is likely to shrink this quarter thanks to slow private consumption and the increasing weakness of industry.

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The EU’s largest economy officially slipped into a technical recession in the first quarter of the year as GDP growth was revised from zero to -0.3%, according to a report by RT. The economic struggles will eventually spread noticeably to other parts of the world.

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“The predicament that the [German] economy is facing at the moment is really down to a number of factors,” said Oppenheimer, who is chief global equity strategist and head of macro research EMEA at Goldman Sachs. “It’s… not a deep recession but it’s obviously been more hit by obvious headwinds,” he added. At the same time, Oppenheimer suggested some positive factors for Germany, noting that “the equity market has been holding up quite well and there are some bright spots, I think, in terms of activity in the economy.”

“Over the short term, we could see a rebound in the DAX along with a broader range of China-related assets,” Goldman Sachs said separately in a note. However, it warned that Chinese trade may not provide as much of a boost as expected. “Going forward, any rise in geopolitical tensions or curtailment in world trade would hinder the German recovery,” the note said, as quoted by CNBC.

But there are positives to be found in the German economy, according to Oppenheimer. “The equity market has been holding up quite well and there are some bright spots, I think, in terms of activity in the economy,” he added saying that there are still “opportunities” in Germany’s small and mid-sized companies, known as the Mittelstand.

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Will the rest of Europe fall into recession as Germany struggles?